Call to regulate HFT, dark pool trading venues

darkpoolAccording to Andrew White, Retail fund managers have called for high-frequency traders and operators of off-market or “dark” trading venues to be brought into the regulatory net to avoid compromising the integrity of the sharemarket. The Financial Services Council also wants the Australian Securities & Investments Commission to impose a tax on order messages — rather than just on trades — by high-frequency traders to cover an expected $40 million increase in its costs of regulating the market over the next four years. But it warned the fee should only be set to cover ASIC’s rising costs in monitoring the increased number of order messages that resulted from HFT orders. The regulatory review follows a boom in “dark” trading, with internal crossing systems designed for large institutional share trades being used by brokers to execute far smaller retail client trades and avoid the Australian Securities Exchange’s trade fees. High-frequency traders — who use computer trading systems to place multiple orders for stocks, many of which are withdrawn almost immediately — have raised their share of trades to an estimated 25-30 per cent. According to research for the FSC, the increase in the number of trades linked to high-frequency traders has disguised the rise in the number of trades executed in “dark” venues. In submissions to the Federal Treasury, the FSC said capital markets had not been hurt by the development of high-frequency trading and pools as much as other places such as Europe and the US, but that the regulation should be overhauled to keep keep pace with technological developments.

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This entry was posted in Business, Dark Pools, Finance, Food for Thought, High Frequency Trading, high-frequency journalism, SEC, The Wall Street Journal, U.S. Economy and tagged , , , , , , . Bookmark the permalink.

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